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Will US fast food workers fight for $15 backfire?

Fast food workers in the US have gained momentum in their struggle for higher wages. But economists warn that the industry could cut some workers out altogether by increasing automation.

More than 1,000 McDonald's employees protested outside the fast food giant's annual shareholders meeting in Chicago on Thursday, where they submitted a petition signed by more than a million people, demanding an hourly wage of $15 and calling on the company to support the right to unionize.

For nearly three years now, a nationwide movement of fast food workers has been demanding higher wages. These workers often earn the legal minimum, which ranges from state to state in the US, but is normally $7.25 per hour or higher.

There are more than three million fast food workers in the US, making them one of the largest occupational groups in the country, according to the Bureau of Labor Statistics. But they are also some of the lowest paid workers.

While wages for middle and low income workers have stagnated or declined over the past thirty years, income has risen precipitously for those at the top. CEOs in the US today make 296 times the average worker's wage, according to the Economic Policy Institute. In the 1960s, heads of companies earned 20 times more than the average worker.

McDonald's, for its part, has responded by raising its hourly wage one dollar above the legal minimum of the state where the restaurant is located. But critics point out that this slight pay increase only applies to those restaurants directly owned by the company, or just 10 percent of the total McDonald's locations nationwide. Franchises are not under obligation to raise their wages.

Several cities have stepped into the debate and raised their legal minimum to $15, first Seattle and then San Francisco. On Wednesday, Los Angeles joined their ranks. The second largest city in America will raise its minimum wage in stages to $15 by 2020.

“It's a judgment call,” Harry Holzer, a professor at Georgetown University and the former chief economist at the US Department of Labor, told DW. “The higher the minimum wage goes, you give more people help, but also at a greater risk of employment loss.”

Fast food workers have been demanding higher wages for the past several years

Double-edged sword

Los Angeles has a large population of low-wage immigrant workers who stand to benefit, according to Holzer. But businesses could undercut these workers by illegally hiring undocumented migrants for less, or by simply moving locations to a neighboring county where wages aren't as high.

Wary of these risks, Holzer supports a more modest proposal by President Barack Obama to raise the federal minimum wage from $7.25 to $10.10. But the impact of even this smaller pay hike would be mixed.

More than 16 million would receive a raise as a result, creating increased earnings of $31 billion, according to the Congressional Budget Office (CBO). But 500,000 people might also lose their jobs as some businesses seek to reduce the growth in labor costs.

Threat of automation

The problem is that in the high-tech, globalized world of the 21st century, businesses have greater leverage over workers due to the double threat of outsourcing and automation.

“We already have lost a lot of jobs to off-shoring and to new, sophisticated capital equipment that replaces unskilled workers,” Lee Ohanian, an economist at the University of California Los Angeles, told DW via email.

“It probably won't be long before McDonald's has an app that allows you to touch an icon on your smart phone, order a happy meal for your kid, pay for it, and then go pick it up,” he said. “Call this the 'Uber app' for fast food restaurants.”

Education, social programs

In an economy that produces many low wage jobs, the US federal government needs to intervene and fill in the gap by providing the benefits that many businesses no longer offer, according to Holzer. This includes everything from health care to paid sick and parental leave. But politics complicates the issue.

“The public sector is going to be too squeezed because on the one side you have the people who hate higher taxes, and on the other side you have the retirement cost of baby boomers,” he said. “They're going to squeeze federal and state budgets so much that there's not much room.”

Education in the US also needs to move away from narrowly focusing on academics, Holzer continued. Schools should broaden their scope to include greater technical and vocational training, providing a greater number of people with the skills needed for higher paying jobs.